Correlation Between NORDIC HALIBUT and Tencent Holdings

Can any of the company-specific risk be diversified away by investing in both NORDIC HALIBUT and Tencent Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NORDIC HALIBUT and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NORDIC HALIBUT AS and Tencent Holdings, you can compare the effects of market volatilities on NORDIC HALIBUT and Tencent Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NORDIC HALIBUT with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORDIC HALIBUT and Tencent Holdings.

Diversification Opportunities for NORDIC HALIBUT and Tencent Holdings

0.16

Correlation Coefficient

NORDIC HALIBUT  Tencent Holdings

Average diversification

The 3 months correlation between NORDIC and Tencent is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding NORDIC HALIBUT AS and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and NORDIC HALIBUT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NORDIC HALIBUT AS are associated (or correlated) with Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of NORDIC HALIBUT i.e., NORDIC HALIBUT and Tencent Holdings go up and down completely randomly.

Pair Corralation between NORDIC HALIBUT and Tencent Holdings

Assuming the 90 days horizon NORDIC HALIBUT AS is expected to under-perform the Tencent Holdings. But the stock apears to be less risky and, when comparing its historical volatility, NORDIC HALIBUT AS is 1.09 times less risky than Tencent Holdings. The stock trades about -0.12 of its potential returns per unit of risk. The Tencent Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,516  in Tencent Holdings on September 21, 2024 and sell it today you would earn a total of  446.00  from holding Tencent Holdings or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NORDIC HALIBUT AS  vs.  Tencent Holdings

NORDIC HALIBUT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORDIC HALIBUT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tencent Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NORDIC HALIBUT and Tencent Holdings

The main advantage of trading using opposite NORDIC HALIBUT and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORDIC HALIBUT position performs unexpectedly, Tencent Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tencent Holdings will offset losses from the drop in Tencent Holdings' long position.

The idea behind NORDIC HALIBUT AS and Tencent Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.